BW Communities

New Ballast Of Recovery

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[After two years, a fair wind seems to be blowing behind the sails of Suzlon Energy. India's largest and one of the top four wind turbine makers in the world has posted a profit (Rs 431.5 crore) for the first time since December 2009 in the fourth quarter of 2010-11 (against a loss of Rs 188 crore in Q4 last year). "Key initiatives focused on lowering operating costs, rationalising inventories and improving operating efficiency delivered the results," says Robin Banerjee, chief financial officer of Suzlon Energy on the seeming turnaround. In addition to lowering the cost base, Suzlon brought down its net debt-to-equity ratio to 1.36, maintained a tight focus on cash flow and drove orders. Suzlon's troubles stemmed from a combination of factors — the global economic slowdown that dried up orders for wind energy, equipment (rotor blades) malfunction that forced an expensive blade retrofitting programme for all its turbines, foreign exchange losses and a mounting debt burden of over Rs 12,600 crore that it incurred for the acquisition of its subsidiaries, German REpower and Belgian gear-box maker Hansen Transmission. Chairman and managing director Tulsi R. Tanti and family cut their stake in the company from 65.83 per cent in March 2009 to 54.84 per cent in March 2011 to infuse funds. Suzlon also sold its 35 per cent share in Hansen for more than Rs 1,700 crore to service loans and undertook a debt-restructuring programme. Old turbine models were phased out and more efficient new models brought in; Suzlon recently launched new generation S9X machines in the market and production of another model S95 turbine will begin soon, followed by launch of S97 series in the fourth quarter of FY12. REpower is also launching new larger offshore wind turbine variants. Will Suzlon maintain its recent profitability? The firm pins its hopes on the growing demand for cleaner energy and large capacity additions. "The case for wind is stronger than ever, and I remain very optimistic about the future of our company and the industry," says Tanti. Those hopes are based on an order book of 4,639 MW (to date) worth Rs 30,100 crore, a jump of almost 60 per cent over the previous year (FY12 revenues are expected to be Rs 24,000-Rs 26,000 crore; FY 11 revenues were Rs 18,000 crore). Nevertheless, Suzlon's financial troubles are far from over. A foreign currency convertible bond (FCCB) of Rs 2,570 crore is due in 2012-13, and Rs 100 crore in January 2012. The competition is causing sleepless nights as well. Gamesa and Siemens are setting up manufacturing bases in India, where Suzlon has over 50 per cent of the market share for the past 12 years. Tanti can breathe easy for now, but not for too long: the winds could just as easily begin blowing the other way. (This story was published in Businessworld Issue Dated 13-06-2011)